Barr is bullish but business exercises caution over the deficit budget

Genevieve Jacobs 5 June 2019 3

Chief minister Andrew Barr speaks to the Canberra Business Chamber post-budget breakfast. Photos: Daniella Jukic, wearefound.

Despite a strongly positive account of the ACT economy’s prospects and underlying strengths from the Chief Minister, the Canberra business community’s response to the Territory’s deficit budget has been cautious, perhaps best summarised by the sentiment that it’s acceptable provided this doesn’t become a pattern.

The chief minister was speaking to the Canberra Business Chamber’s annual post-budget breakfast after unveiling a budget that continues rate rises and infrastructure spending but heads into a modest deficit for the next two years.

He contrasted the local economy’s achievements with the national picture, noting the shift towards 62.5 per cent private sector employment, the ACT’s strength by comparison with Tasmania and the Northern Territory and our national leadership in export services.

Canberra Business Chamber president Archie Tsirimokos.

Mr Barr said that the ACT’s share of Commonwealth revenue is historically low, but praised “once in a generation” levels of co-operation with the NSW State government on regional investment in transport, freight access and other regional economy-boosting measures.

“Thirty years into self-government, it’s very clear that we are expected to pay our own way,” Mr Barr said.

He flagged the continuing importance of tax reform although, he said, much of the heavy lifting had already been done with continuing stamp duty reform, the abolition of insurance tax and the highest payroll tax threshold in Australia and its subsequent benefits for small business.

“When the land sales are finished, how will we pay our way?” Mr Barr asked.

Archie Tsirimokos, Business Chamber CEO Dr Michael Schaper, Chief Minister Andrew Barr, Roby Tyson of Price Waterhouse Coopers and Professor Satish Chand, UNSW.

But while many in the business community accepted that the forecast deficits were modest and on the face of it manageable, there was plenty of caution about the government’s decision to continue investing heavily in infrastructure while raising rates.

Speaking at the breakfast, UNSW’s Professor Satish Chand cautioned that there is limited space to continue raising rates before there’s an eventual impact on the capital value of fixed assets. “The risk is that ongoing rate rises will eventually affect property prices and deflect investment across the border,” he said.

Advocating a wider use of public-private partnerships, Professor Chand said that while the ACT economy had successfully decoupled from the public service grip, there are still risks from Federal government decentralisation and downturns in the national economy. He also suggested that a Canberra balance sheet ought to value the natural environment more highly and take those values into account in urban planning.

“I think we could bottle both the air and the tap water and export it to India and China!”, he said.

The ACT budget prioritises ongoing infrastructure investment.

Rob Tyson of Price Waterhouse Coopers also gave a granular analysis of economic growth across Canberra noting the changes in areas like Civic, which has boomed to the value of more than $6billion with the introduction of diverse development including residential. Gungahlin has slowed, while both Garran and the airport are now billion dollar local economies.

But Mr Tyson also pointed to evidence that Canberra households are vulnerable to slowed wage growth, increasing costs of living and the likelihood that the bottom of the property market was approaching, enhancing people’s anxiety about the value of their assets.

Responding to Region Media’s question, the Chief Minister said he was open to further discussions on how to remediate the effect of the rate rises on people who are asset rich but cash poor. These might include deferrals and special measures for long term residents who have not paid stamp duty for many years.

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3 Responses to Barr is bullish but business exercises caution over the deficit budget
Veceslav Stanuga Veceslav Stanuga 10:40 pm 05 Jun 19

So the king is showing signs of a crumbling empire with the emphasis on expansion and development at the expense of the householder. We had heard previously that his intention was to introduce a law so properties could be subdivided for development of a second property, which is designed to increase the number of dwellings in the existing suburbs. This move to increase rates is a perfect way to push people into a situation where they may take this option to get out of debt. This minister cannot be trusted, he does not have the interest of the people in view but is only interested in assisting big business at the expense of the majority of residents in Canberra who in fact are paying for all this development which is not really for their benefit. And now we are going into debt due to unrealistic expansion.

HiddenDragon HiddenDragon 6:30 pm 05 Jun 19

“Responding to Region Media’s question, the Chief Minister said he was open to further discussions on how to remediate the effect of the rate rises on people who are asset rich but cash poor.”

Could we please stop pretending that the only group, as such, which might have a problem with rapidly and relentlessly rising property rates are asset-rich oldies.

We have just had already crisis-level interest rates cut by the RBA, with further cuts in prospect, largely for the benefit of heavily-mortgaged households which are struggling, to varying degrees, to cope with living costs outpacing incomes. There are plenty of these households in the ACT and they are NOT asset-rich oldies.

    bj_ACT bj_ACT 10:26 pm 05 Jun 19

    Spot on hidden dragon. It’s the working poor of the outer suburbs who are clearly struggling with the ACT Government tax hikes the most.

    Excellent analysis by Digital Finance Analytics and a simple study of ABS Census data shows this to be the case.

    Mr Barr can’t keep hitting our poorest residents to allow him to fund his pet projects and his inner city improvements.

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